Has the graduate milkround gone sour?

LONG READ: Today's big employers are looking further than a handful of university campuses.

Nineteen sixty-six was a good year to be a student. A pint of beer cost about two shillings (equal to 10p), sexual intercourse had recently been invented and nobody had heard of tuition fees. It was also a good time to be a graduate. Long the recruiting grounds for the civil service and the professions, universities were now also being targeted by businesses, looking to fill their ranks with freshly minted clever clogs.

The early years of what came to be known as the graduate milkround (in which big employers toured the country's universities, as though delivering milk) were not without their difficulties, however. As a squeaky-cheeked grad by the name of Martin Sorrell (see below) wrote in Management Today's December 1966 issue, the long-haired students weren't all that fussed about a career in industry, while the corporate bods in smoky personnel departments were singularly unimpressed with the calibre of the young candidates on offer.

In the years since, university has gone from being an elite pursuit to a mass rite of passage, while the milkround has become the foundation of corporate recruitment. But just as nobody now gets their two pints of semi-skimmed from a dairyman doing the rounds on a glorified mobility scooter, the old milkround is starting to look distinctly 20th century. Graduates are no longer the only horse in town.

'Our graduate scheme will probably grow slowly, but the exponential growth will be in apprenticeships,' says Ralph Tribe, UK and Ireland director of people at Sky. In four years, Sky's apprenticeship intake has gone from a handful to 200 - double the number of its graduate places. They're fulfilling similar roles as well. 'We don't place an accelerated career path badge on a graduate relative to an apprentice. We don't see one group as the managers of the future and the other as not. That's just not how it works at Sky.'

The story's the same at EY, which has quadrupled its school-leaver intake to 200 since 2012, with 900 spaces reserved for graduates. 'It doesn't matter whether you're a graduate or apprentice,' says EY's head of student recruitment Dominic Franiel, who predicts further increases in the apprenticeship scheme, even if this means grad numbers could decline somewhat.

'An apprentice would join on a five-year training contract, a graduate on three. It leads into the same professional qualification. At the end of five years, they essentially have the same opportunities available to them.'

Last year, there were half a million apprenticeship starts. While most of these were equivalent to GCSEs or A levels, 20,000 were higher (equivalent to undergraduate degrees) or degree apprenticeships. That's double what it was the year before, and 10 times the level in 2010/11, when the Coalition government started to promote the programme.

Compare that with what's happening in graduate recruitment. Only 55.8% of grads under 30 are in high-skilled jobs. The rest are either unemployed, economically inactive or in lowto medium-skilled work, with little hope of freedom from the heavy debts they accrued as students.

Indeed, of 500,000 or so students leaving university every year, only 50,000 end up in graduate schemes, traditionally where the best jobs were. So what's happening?

It's tempting to put the changes taking place at firms like these down to the apprenticeship levy, which is due to hit larger firms from April 2017, but both Franiel and Tribe say their programmes were already expanding before the levy was announced.

'The apprenticeship levy is a curiosity to us,' says Tribe, who points out that being able to offset an apprentice's training against the levy is a minor incentive to hire more of them, given that salaries are 10 times higher than training costs. 'The growth is because we just like apprenticeships.'

In fact, the rise of apprenticeships is best seen as part of a wider change occurring in graduate recruitment. As well as hiring more school-leavers, more and more employers are saying to students that they don't care where you studied or even what grades you got.

It doesn't take a double first from Cambridge to infer from this that recruiters are struggling to find the necessary talent the old way. The question is why.

One explanation is that today's students just aren't up to it. 'The age-old debate about skills gaps gets a bit tiresome, but there is an issue, otherwise employers wouldn't be raising it and we wouldn't have vacancies going unfilled,' says Stephen Isherwood, chief executive of the Association of Graduate Recruiters.

Breaking it down, Isherwood says this is particularly acute in some sectors - there's a desperate shortage of electronic engineers for instance - and in some locations. However it also reflects a structural peculiarity in the UK labour market.

'What's so different about the UK market is that what you study doesn't have to drive what you do for a career,' he says. 'If you're a big four accountancy firm in the UK, you'll go to Nottingham University and pretty much the entire campus is your target market. If you go to New York University, it's just one course.' As a result, employers find it difficult both to target potential recruits and to build relationships with university departments, which in turn makes it less likely students will have gained the skills business needs.

That could be part of UK plc's graduate recruitment problem, but it's not all, says business author and former BBC and Unilever HR head Gareth Jones. 'The elite organisations like Goldman Sachs and McKinsey will privately tell you they used to recruit the brightest and the best. In truth, they're finding it harder and harder because the brightest and the best don't want to work for organisations.'

James Uffindell, who describes his graduate recruitment start-up Bright Network as a 'cleverer milkround', agrees. 'Social enterprises and high-growth tech businesses are taking the high-performing grads. They want to do something different, something contrarian. The other theme is that millennials want to start their own businesses,' he says.

Ah, 'millennials'. Homo digitalis. A lot of what's written about the generation born between the early 80s and mid-90s presents them as starkly different from Generation X and Baby Boomers. These digital natives have ditched salary, security and status in favour of such higher things as purpose, job satisfaction and snazzy perks. So say the marketers, at any rate. HR people are harder to convince. 'If you tell me that 25-year-olds are different from 45-year-olds, I won't find that surprising,' says Jones. 'The interesting question is what will the 25-year-olds look like when they're 45?'

Isherwood and Tribe meanwhile both point out that interest in graduate schemes is as healthy as ever among young students, with an average of 68 applications per place. Still, quantity of interest doesn't necessarily translate to quality, and all those computer whizzes going to work for tech firms have to be coming from somewhere.

Martin Sorrell writes for Management Today, December 1966

In MT’s first year, a young graduate named Martin Sorrell wrote a piece called ‘Finding tomorrow’s managers’ about the state of the milkround. We asked him to reminisce:

MT: Where did the idea for your 1966 milkround feature in MT come from?

Sorrell: It came out of frustration with the milkround and, more practically, I needed a summer job before Harvard Business School. [MT founding editor] Robert Heller said he’d give me £100 if it was published.

MT: If you were 18 years old today, do you think you'd do a degree or would you be tempted by an apprenticeship?

Sorrell: I’d still go for a degree – one, if it exists, covering Chinese and code and definitely calculus. Maybe after that I would do an apprenticeship – something like WPP’s Fellowship programme, which gives successful applicants the chance to experience different marketing services disciplines in three WPP companies over the course of three years, often on three different continents. It’s the industry’s most sought-after scheme and harder to get into than Harvard Business School, though, so if it had been around when I was a graduate I might not have made the grade!

MT: Do you think we've seen ‘peak graduate’?

Sorrell: Apprenticeship schemes are very good, as they’re tailored to the needs of an industry. I don’t think we’ve reached ‘peak graduate, though. It’s a two-humped camel, if you like. Both are flourishing.

It would therefore seem that the talent pool available to traditional recruiters has dried up a little, whether because education hasn't caught up with the private sector's demand for skills or because grads are themselves less interested in what big business has to offer.

It would be wrong, however, to think employers only opened up their intake because they were pushed. They are all at pains to say they're not scraping the barrel. Instead, they discovered an untapped resource of smart youngsters who've turned up their noses at university, which would leave them around £40,000 in debt, in favour of apprenticeships that could earn them £40,000 over the same period.

'In our experience the school-leavers are just as capable and in some cases they completely outshine their counterparts in the graduate programme. It comes back to finding the best people, and you find them in all places and walks of life,' says Franiel.

Diversity is more than just a buzzword to these recruiters. 'The whole approach to diversity and why it matters has changed over the years. It used to be to do with fairness, but actually now it's to do with different thinking. At Sky, our challenge is to keep pace with a very diverse customer base. In order to connect with potential and existing customers we need a workforce that reflects that,' says Tribe.

Jones puts it more bluntly. 'Employers don't want carbon cut-out 2.1s from Russell Group universities because they all look the flaming same. They want people who are a bit different, who bring something new.'

Vetted by in-house assessments rather than academic grades, apprentices and students from new universities -many of them specialising in vocational degrees - can fulfil that need. Finding them isn't easy though. The milkround, as it is, doesn't go to the University of East London or Paisley, because it costs money to get on campus. Indeed the average graduate recruiter still only visits 20 universities in a given year and only recruits from 30. There are online job boards, but many students in these universities don't look at the grad schemes because they haven't realised some of the big recruiters would even consider them.

This hasn't stopped business from trying. Sky, for instance, spends 'a disproportionate amount of time and money on the non-redbrick universities', getting boots on the ground to talk to students not only about opportunities at the company but also about how to write a good application.

Recruiters are also increasingly turning to online techniques such as holding 'Twitter takeovers' or connecting through services like Bright Network, which attempts to give students more personalised career advice.

Despite the success of these measures, getting on- campus is still considered essential in attracting quality applicants, which presents a problem when it comes to finding school-leavers - there are 150 universities in the UK, but over 7,000 schools.

Do not expect this to slow the growth of apprenticeships, however. The government's commitment to parity of esteem means schools will soon be measured on apprenticeship starts as well as university places.

Apprenticeships will become more and more popular, but don't take this to be the writing on the wall for the graduate milkround, says Isherwood. Universities are responding to the rise in tuition fees and apprenticeships by focusing more on employability, such as offering more work placements and vocational training as part of undergraduate courses.

Besides there's a value to education beyond just skills training. 'Enlightened employers say university is about whole-of-life experience. They still want to work with people who have that experience. It's why I don't think graduate recruitment will disappear,' says Isherwood.

The value of university to employers hasn't faded. But it's no longer the only experience that's considered valuable.

Ultimately, that means more variety and more choice, which can only be good for both business and young people.

WHY ONE GRAD SPURNED THE MILKROUND

Ollie (not his real name) says: 'If you're looking for a career in law, you'll want to work for Slaughter and May, right? But tech is different. Small firms have a lot to offer. They make it clear they want someone with specific skills rather than just a 2.1 in any subject from a good university, and they don't take three months to get back to you after you apply, like big companies do. The culture there is a lot slower. They're going to have to start thinking about that.

'I did four undergraduate internships. The last one was in a tech role at a major bank, and it got me a job offer on its graduate scheme. Working for a big corporate looks great on the CV, but I turned it down for an internship at a tech start-up, which I heard about through my university career service.

'I consider myself a machine learning specialist. I interviewed at Google last year and got to the penultimate round, and they asked what I was doing that was interesting in my current job. I couldn't answer because there wasn't anything interesting. Now, I could talk about lots of cutting-edge stuff.

'At the start-up, I got stuck in from day one, I'm learning tons of new tech and meeting people I'd never have met otherwise. The bank just doesn't value tech - they use it as a stop-gap to fill the holes where they're missing business logic. If I'd wanted to work in machine learning there, I'd have had to join a different division and work my way up over a few years. Within five years my degree will be outdated - I can't let that go.'